美國雅培 (ABT) 2005 Q4 法說會逐字稿

Good morning and thank you for standing by.

Welcome to Abbott's fourth-quarter 2005 earnings conference call. (OPERATOR INSTRUCTIONS).

This call is being recorded by Abbott.

With the exception of any participants' questions asked during the question-and-answer session, the entire call including the question-and-answer session is material copyrighted by Abbott.

It cannot be recorded or rebroadcast without Abbott's expressed written permission.

I would now like to introduce Mr. John Thomas, Divisional Vice President Investor Relations.

Good morning and thank you all for joining us.

Also on today's call with me will be Miles White, Chairman of the Board and Chief Executive Officer;

Tom Freyman, our Executive Vice President of Finance and Chief Financial Officer;

Jeff Leiden, President and Chief Operating Officer of our Pharmaceutical Products Group, and Rick Gonzalez, President and Chief Operating Officer of our Medical Products Group.

Miles is going to make some opening remarks, and Tom will review the fourth-quarter and year-end financial results and provide more financial detail regarding our outlook for '06.

Jeff will discuss performance of the Pharmaceutical Products Group, and Rick will cover the Medical Products Group.

Following our comments, of course, we will take any questions you have.

Some of the comments we make today will be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995.

Added caution that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements.

Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Exhibit 99.1 of our Securities and Exchange Commission Form 10-Q for the quarter ended September 30, 2005 and are incorporated by reference.

We undertake no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments.

In today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance.

These include such things as earnings per share, gross margin, SG&A, each excluding specified items.

In accordance with the SEC's Regulation G and in line with our standard reporting practice, these non-GAAP financial measures are reconciled to the comparable GAAP financial measure in our earnings news release and Q&A, which we issued this morning and is available on our website at www.Abbott.com.

And with that, I will now turn the call over to Miles.

Miles?

Okay.

Thanks, John, and thank you all for joining us this morning.

This morning we announced full year and fourth-quarter ongoing earnings results for 2005.

Similar to 2004, our performance was right in line with our previous guidance of double-digit growth in ongoing earnings per share.

In addition, today we confirmed our previously announced 2006 ongoing earnings per share guidance range.

In a moment, Tom will provide further details on our full-year 2005 and fourth-quarter results as well as our expectations for 2006.

Rick and Jeff are going to cover the performance and growth outlooks for their major businesses.

I will spend a few minutes giving you my perspective on 2005 and 2006.

Our commitment to a well-balanced broad-based healthcare portfolio as well as our target of double-digit earnings per share growth.

But before we get started, I know there is one bit of interest that is on everybody's mind this morning, and rather than make you wait for Q&A on that, we will address it now.

So let me take a moment to comment on Boston Scientific and Guidant's joint announcement this morning that they have signed a definitive merger agreement.

We are obviously pleased with this latest development as we had previously agreed to purchase Guidant's vascular and endovascular businesses upon the closing of Boston's acquisition.

This acquisition complements our strategy in Medical Products to build market-leading positions in higher margin, high growth, innovation-driven businesses, and it complements our current Abbott vascular business.

Our agreement with Boston Scientific provides us with Guidant's Vascular Intervention and Endovascular Solutions businesses, which had sales in excess of $1 billion in 2004.

This includes Guidant's vascular commercial R&D and manufacturing operations, as well as the market leading line of coronary and peripheral vascular products.

In addition, as part of the agreement, we will gain a broad portfolio of intellectual property, including rapid exchange technology and stent design, as well as Guidant's Xience-V drug-eluting stent which is currently in development.

Guidant's vascular business would expand our portfolio of innovative vascular products, which includes our ZoMaxx drug-eluting stent, our Xact Carotid stent and our StarClose Vessel Closure device, which Rick will talk about in just a moment.

We will provide further details regarding the transaction upon closing.

Now I'm going to move to our comments on 2005/2006.

With regard to our 2005 full-year results, we once again reported strong performance on both sides of our business, reflecting the actions we have taken and continue to take to build and shape our Company for higher growth, greater balance and the consistent earnings performance that our investors seek.

Sales in both our Medical Products group and our Pharmaceutical Products group grew double-digits in 2005, exceeding 10% and 15% respectively.

This performance helped drive total Abbott sales growth of 13.5% and ongoing diluted earnings per share of $2.50, the midpoint of the EPS guidance range that we provided more than a year ago.

In addition, cash flow generation in 2005 reached record levels.

The gross margin ratio improved meaningfully in the second half of the year.

We increased our dividend for the 33rd consecutive year, and we bought back 30 million shares of our own stock.

Our broad base of healthcare businesses delivered consistent performance last year.

Like they so often do, our employees manage through a few challenges in 2005 and still achieved our near-term financial goals while never losing sight of our long-term targets for success.

So I want to recognize our people for another year of outstanding commercial, financial and operational discipline and execution.

In our Medical Products Group, all of our emerging medtech businesses grew at strong double-digit rates in 2005.

Abbott Diabetes Care, for example, grew nearly 35%, surpassing the $1 billion sales mark.

Abbott Vascular Devices grew 15%.

Abbott Molecular grew nearly 30%.

Abbott Spine grew more than 40%, and Abbott Point of Care grew 24%.

These higher margin medtech businesses have enriched the mix of our Medical Products Group, complementing our larger market leading businesses such as Ross Nutritionals and Abbott Diagnostics where we continue to work toward accelerating sales growth and expanding margins.

These multimillion dollar businesses generate steady top-line results and outstanding cash flow.

The future promise of our medical device businesses was evident last year with a series of FDA approvals for new Abbott medical technologies, including approvals for our Xact Carotid stent, our StarClose Vessel Closure device, our PRISM automated blood-screening instrument, our Cell-Dyn Sapphire Hematology System, our FreeStyle Connect Blood Glucose Monitor and more than 50 Diagnostic Products, including new assays and new instrument systems.

Rick and his team have done an outstanding job positioning Abbott at the forefront of the medtech industry across a range of fast-growing segments where we already have or are quickly building market leadership positions.

In our Pharmaceutical Products Group, we delivered another year of strong double-digit sales growth in 2005, well ahead of our industry peers.

The steady progress we have made with our major marketed pharmaceuticals both commercially and with new follow-on products and new indications will provide Abbott with consistent earnings power this year, next year and over our long-range financial plans.

In 2005 our global pharmaceutical commercial teams were quietly outperforming expectations on many of our major pharmaceutical brands -- products such as HUMIRA, TriCor, Kaletra, Depakote and Synthroid.

Many of these products grew at strong double-digit rates last year.

In addition, our U.S. sales force helped Boehringer Ingelheim grow Mobic more than 100% to more than $1.2 billion, Flomax by 8% to nearly $900 million and Micardis 28% to more than $200 million.

In 2005 we also achieved nine FDA regulatory submissions or approvals of new Pharmaceutical Products and new indications for marketed products that will help our U.S. pharmaceutical business sustain its industry-leading growth rate.

In fact, in 2006 while many companies are expected to report below average growth in pharmaceuticals, our U.S. pharmaceutical business adjusted for the BI products will deliver approximately 10% sales growth, a level of performance that will exceed the majority of our U.S. pharma peers based our recent estimates, and it will be the sixth consecutive year that that is the case.

I will let Jeff cover those details, but one product that I would like to mention is HUMIRA, our biologic for treating rheumatoid arthritis and psoriatic arthritis.

HUMIRA is clearly one of our success stories from last year, both in terms of commercial execution and R&D productivity.

In 2005 HUMIRA delivered global sales of $1.4 billion, outperforming our previous guidance.

For 2006 we expect global HUMIRA sales of more than $1.9 billion, driven by continued market share gains in rheumatoid arthritis, as well as our recent entry into the large and growing dermatology market, a segment that is now estimated to be north of $1.5 billion in value.

HUMIRA is truly a unique medication for patients.

This anti-TNF biologic offers the potential to treat an array of debilitating diseases with a single self-injection once every two weeks.

The scientific data behind HUMIRA is remarkable and may not yet be fully appreciated by physicians and patients, and we expect that that will change soon.

In the meantime, we will continue to execute on our low-risk development program for new indications that can further expand HUMIRA's peak year sales potential.

So in summary I am very pleased with our 2005 results.

We achieved or exceeded the targets we set for sales, earnings per share and cash flow.

And, in fact, all three -- sales, earnings per share and cash flow -- were records last year for Abbott.

We also had an unusually healthy flow of new regulatory submissions and new product approvals in 2005 from our Medical Products pipeline, as well as our late stage pharmaceutical pipeline.

We had a few things that did not go our way as you know, but our overall hit rate was very high.

With the continued progress that we are making on our broad-based strategy, Abbott has grown into a more than $20 billion company with a deep portfolio of large, medium and small products and businesses that now encompass some of the most attractive growth segments in healthcare.

As we begin 2006 and look ahead to the next several years, our focus will remain on commercial execution, investing for higher future growth and meeting our financial targets, which we think are all very reasonable.

Our Medical Products Group and our Pharmaceutical Products Group have clearly defined and complementary growth strategies that offer one of the broadest and most stable business models in the healthcare industry.

The breadth of assets in our broad-based portfolio is one of Abbott's fundamental enduring strengths, and that will only get stronger and more balanced in the years ahead.

It is a platform that generates steady sales growth, consistent earnings power and healthy cash flow.

And I'm confident you will see similar performance again this year.

Now let me turn to Tom for a report on the financial performance.

Thanks, Miles, and good morning, everyone.

For the fourth quarter, we reported ongoing diluted earnings per share of $0.76 at the midpoint of our previous guidance range of $0.75 to $0.77.

Sales in the quarter increased 7% driven by growth across many of our businesses, including double-digit growth in our U.S.

Pharmaceuticals, Diabetes Care and Vascular businesses.

Sales growth excluding exchange was 7.6%.

The gross margin ratio this quarter improved 100 basis points from the third quarter to 54.4% consistent with our forecast of sequential improvement.

We saw steady expansion of this ratio in the second half of 2005.

Both SG&A and R&D investments increased mid single digits in the fourth quarter, also consistent with the forecast we provided last quarter.

For the full year, we delivered sales growth of 13.5% and ongoing earnings per share growth of 10%.

R&D increased more than 7% and SG&A more than 10%.

All of these results were in line or above the expectations we established at the beginning of the year.

Cash flow for 2005 reached record levels with operating cash flow of $5 billion and free cash flow reflecting operating cash flow less capital expenditures and dividends exceeding $2 billion.

I would also note that we completed the repatriation of $4.3 billion of foreign earnings in accordance with the American Jobs Creation Act of 2004, the maximum opportunity available to us.

Before I turn to the outlook for 2006, I would like to remind you of the impact of the 2005 amendment to our co-promotion and distribution agreement with Boehringer Ingelheim or BI.

One result of this amendment is that $2.3 billion in low margin 2005 sales will not recur in 2006.

While this will distort reported sales growth, our P&L ratios will improve substantially.

Recall that the amount of income Abbott will earn in 2006 under the amended BI agreement is the same as the amount we would have earned under the original agreement.

We have confirmed our original full-year ongoing earnings per share guidance for 2006 of $2.66 per share to $2.72 per share.

We are also providing today for the first time ongoing earnings per share guidance for the first quarter of between $0.62 and $0.64.

This guidance excludes both specified items as discussed in our release and the impact of changes in accounting rules for stock compensation expense, which I will discuss in a moment.

It also excludes the impact of the pending acquisition of Guidant's Vascular business.

We are comfortable with the quarterly EPS forecasts for the remaining three quarters as reflected in the current Wall Street consensus estimates which reflects steady growth throughout the year.

Excluding the impact of BI products, we expect 2006 sales growth in the upper single digits.

Since we will no longer report sales of the BI products, reported sales are projected to be down for 2006 in the low single digits.

We expect the gross margin ratio to improve approximately 500 basis points in 2006 over full-year 2005 as a result of the revised BI agreement, as well as our ongoing efforts to streamline operations across our businesses.

These actions will boost the ratio into the high 50s.

We are forecasting another year of solid investment in programs to drive future growth with increases in R&D and SG&A in the mid to high single digits.

Regarding other aspects of our 2006 outlook, we are forecasting a modest increase in income from the TAP joint venture, and that interest expense level is similar to 2005.

Tax rate for ongoing operations in 2006 is forecasted to be between 23.5 and 24%, a modest improvement over 2005 reflecting ongoing benefits of tax planning initiatives.

We expect cash flow again to be strong with free cash flow in excess of $2 billion.

For the first time, we are providing the impact of the change in accounting for stock compensation expense on 2006 earnings of approximately $0.15 per share which compares to stock option expense of $0.14 per share in 2005 under previous accounting rules.

We expect approximately $0.06 per share of this non-cash expense to occur in the first quarter and $0.03 per share in each of the subsequent three quarters.

This quarterly pattern is consistent with our previous footnote disclosures.

With that, let's turn to the business operating highlights, beginning with the Pharmaceutical Products Group.

Jeff?

Thanks, Tom.

Before I discuss our outlook for 2006, let me take a moment to review 2005.

Last year we focused on two critical success factors in our commercial and R&D organizations.

First, to deliver continued double-digit sales growth, and second, to achieve more than 10 FDA submissions or approvals for new products or new indications.

Despite a few disappointments in our pipeline, we made important progress towards meeting our goals last year.

We continue to outperform most of our pharma peers with sales of our Pharma Products Group up double-digits for the full year.

In fact, as Miles mentioned, this is the fifth consecutive year we have achieved double-digit performance.

Our domestic pharmaceuticals business grew 16% for the full year, and adjusted for the BI products, we expect to outperform the majority of our pharma peers with with growth of approximately 10% in 2006.

Our success in 2005 was due in large part to outstanding execution from our branded marketing teams.

We have six major products with sales growing strong double-digits -- HUMIRA, Kaletra, TriCor, Ultane, Omnicef and Mobic.

U.S. sales with Synthroid exceeded our expectations by nearly $100 million, which is a significant accomplishment by our commercial team.

Also in 2005 we achieved nine FDA submissions or approvals, a notable accomplishment as we work in an ever more challenging regulatory environment.

We received worldwide regulatory approval for and launched HUMIRA for both early RA and psoriatic arthritis.

Psoriatic arthritis is the first new disease indication beyond RA, making HUMIRA a true pipeline in the drug with five additional low-risk high reward opportunities coming over the next three to four years.

In 2005 we also submitted HUMIRA for ankylosing spondylitis and for RA in Japan.

We obtained FDA approvals to launch Kaletra for once daily use, as well as the new Kaletra tablets, a more convenient formulation of our leading HIV medicine.

We also received FDA approval for and launched Zemplar capsules, an oral form of our Vitamin D therapy for kidney disease, as well as Depakote ER for bipolar disorder, a new indication for a long established brand.

And in the TAP pipeline, febuxostat, TAP's treatment for gout, received an FDA approvable letter.

With that, let me walk you through the performance of some of our major Pharmaceutical Products in 2005 and provide you with an outlook for 2006.

HUMIRA full-year 2005 worldwide sales were 1.4 billion, exceeding our expectations by more than 100 million.

Several factors drove this success.

In the U.S.

HUMIRA's new prescription share of the total anti-TNF self-injectable market has reached an all-time high, more than 26%, and is outpacing both the market and our competition.

Rheumatology total prescription share is now more than 30% with new prescriptions growing even more rapidly, which as you know is a good indicator for continued long-term growth.

Our best-in-class skin data made for the successful worldwide launch of HUMIRA for psoriatic arthritis, which received regulatory approval along with our early RA indication in the fourth quarter of last year.

U.S. prescription share in the dermatology segment is off to a strong start only a few months into the launch.

We submitted a regulatory application for ankylosing spondylitis in October of last year and anticipate approval in the second half of 2006.

Beyond ankylosing spondylitis, we continue to evaluate HUMIRA for the treatment of four additional autoimmune diseases that I will discuss in a moment.

Given the continued momentum we have seen with HUMIRA, we forecast 2006 worldwide sales of more than 1.9 billion.

TriCor continues to perform well.

Sales were 927 million for the full year, up nearly 20% significantly outperforming the growth of the total cholesterol market.

We expect double-digit growth again for TriCor in 2006.

TriCor also continues to be an important product for use in combination therapy.

Let's turn to Kaletra which has maintained its market leadership position as the number one protease inhibitor in the world with worldwide sales last year of $1 billion representing double-digit growth.

With the introduction of the more convenient Kaletra tablets in the U.S., we continue to build momentum in our HIV business, gaining share in the PI market since the tablet launched.

Our efforts focus on differentiating Kaletra by its exceptional viral suppression abilities, as well as convenience and tolerability.

In 2006 we expect mid single digits sales growth for Kaletra worldwide.

In the fourth quarter, Depakote ER received FDA approval for the treatment of bipolar disorder.

Already used to treat epilepsy and migraine headaches, Depakote ER offers patients with bipolar disorder the convenience of once daily dosing become.

ER now accounts for close to 50% of total Depakote prescriptions.

In 2006 we expect high single digits sales growth from our Depakote franchise.

Synthroid exceeded our expectations in the U.S. for the full year, coming in at nearly 500 million.

Despite the availability of generic therapies, the vast majority of patients and physicians continue to choose Synthroid.

We have nearly 60% brand retention, more than a year and a half after generic approvals.

For 2006 we anticipate full-year U.S. sales Synthroid of more than 400 million.

In our anti-infective franchise, we achieved our goal of 1 billion in global Biaxin sales despite generic competition for the immediate release form of the product.

Omnicef continues to be one of the fastest-growing antibiotics in the U.S. with market share of more than 10% and full-year sales of nearly 500 million.

As a result, 2005 sales in our worldwide anti-infective franchise grew nearly 4%, despite generic competition for Biaxin IR.

For 2006 we anticipate strong double-digit sales growth once again from Omnicef and have factored in the ongoing impact of generic competition for Biaxin IR.

Concerning Biaxin XL, as you know, we have now been granted three preliminary injunctions against companies attempting to bring a generic version of XL to the market.

These PIs prevent the launch of a generic until a verdict is reached in a full patent infringement trial, which is not likely to begin until this summer, although a formal trial date has not yet been scheduled.

Our antiseizure product, Sevoflurane, known as Ultane in the U.S. and Sevorane outside the U.S., grew double-digits again in '05.

For 2006 our plan contemplates an at risk generic launch; however, much like our efforts with Synthroid, we intend to compete to maintain our market-leading share.

We have dedicated significant support from our commercial team, and we remain committed to this brand for the long-term.

So given our momentum, including the continued strength of HUMIRA, TriCor, Kaletra, and Omnicef, we expect our U.S. pharma business to deliver approximately 10% sales growth this year adjusted for the impact of BI products.

In our Abbott international business, we anticipate mid single digit growth in '06.

Let me move onto TAP where our income from the TAP joint venture was 440 million in 2005, consistent with our forecast.

With regard to Prevacid, fourth-quarter and full-year sales were also consistent with our expectations, and though Lupron further strengthened its position as market leader, the share now in the '60s, sales were down in the fourth quarter and the full year.

This was primarily related to the impact of changes in physician reimbursement and a decline in the overall market.

For '06 we plan for Prevacid and Lupron sales to be flat to slightly down with a modest increase in income from the TAP joint venture at 450 to 475 million.

In TAP'S late stage pipeline, Phase III trials began in December for TAK-390MR, a new modified release PPI for the treatment of acid-related disorders.

TAP anticipate submitting for FDA approval by early 2008.

In addition, TAP continues with the development of Ilaprazole, a new PPI compound they licensed from ILYANG Pharmaceuticals.

Regarding the gout drug, febuxostat, TAP remains optimistic that it will receive FDA approval and launch in 2006.

Finally, I want to review some of the key compounds in our late stage R&D pipeline. 2006 will be another terrific year for HUMIRA as we advance five additional indications.

We are looking forward to sharing results from our Phase III maintenance trial for HUMIRA in Crohn's Disease.

As you will recall, we presented promising Phase III results already showing HUMIRA induces clinical remission in Crohn's Disease patients.

The maintenance trial is the second pivotal that will be included in our sBLA submission later this year.

HUMIRA should have a distinct convenience advantage over current therapies given that it is self-administered.

We are also looking forward to the anticipated launch this year of HUMIRA for ankylosing spondylitis, which will be a third major indication.

HUMIRA continues to progress in ulcerative colitis, juvenile RA and psoriasis.

Selectively all of these follow-on indications represent a 1 to $2 billion incremental peak year of sales opportunity beyond our base RA business.

Regarding Xinlay, we expect to have results from our nonmetastatic Phase III trial in prostate cancer known as 244 later in the year, and at that time, we will update you on our regulatory plan.

Concerning levosimenden or Simdax, our treatment for acutely decompensated heart failure, we continue to explore our options with the FDA and European regulatory authorities.

We expect to finalize our plans and provide an update also later in the year.

Our pain compound, the controlled release formulation of Vicodin, has now begun Phase III clinical trials for moderate to severe pain.

And in Phase II, ABTA 74, is our anti-IL-12 biologic for autoimmune disease.

We are encouraged by the early data for this class of molecule in both psoriasis and Crohn's, and in addition, we are pursuing cutting-edge research for ABTA 74 in multiple sclerosis, which as you know is a disease with very limited treatment options.

We anticipate sharing Phase II data in MS later this year.

As we have discussed previously, we view our pharmaceutical pipeline as a portfolio of opportunities.

In addition to the development of lower risk high-yield late stage opportunities like HUMIRA, we have several truly innovative therapies in early development for the treatment of pain, cancer and autoimmune disease.

We have industry-leading capabilities in both biologics and small molecules, which allow us to diversify our pipeline across a broader base.

So for our Pharmaceutical Products Group in '06, we are looking forward to another year of above industry average growth.

Adjusted for BI products, our U.S. pharma business will deliver sales growth of approximately 10%.

In our pipeline, we anticipate the launch of new indications and new regulatory submissions, as well as the advancement of a number of truly innovative earlier stage therapies, resulting from breakthrough science in our discovery program.

With that, I will turn it over to Rick.

Thank you, Jeff, and good morning, everyone.

I would also like to review our 2005 accomplishments and discuss how we are positioning our business for continued double-digit growth.

In 2005 the Medical Products Group succeeded in its goal to deliver double-digit sales growth while participating in the highest growth segments of the Medical Products industry.

This is the second year in a row that MPG has achieved double-digit growth since implementing our new decentralized operating model.

We continue to execute on our plan to build $1 billion plus businesses in markets where innovation and technology drive success such as Abbott Diabetes Care, which surpassed $1 billion last year.

The success of this business reaffirms Abbott's ability to successfully integrate strategic acquisitions, accelerate their growth and achieve a leadership position.

The productivity of our pipeline was also evident in 2005 with approvals and launches of seven key products.

We received FDA approval for and we launched StarClose, an entirely new vessel closure device that provides physicians with a safe and secure close of the femoral artery in just a matter of seconds.

We were second to market with the FDA approval and U.S. launch of our carotid stent platform, Xact and EmboShield.

In our diagnostic business in the U.S., we launched the Abbott PRISM system, ushering in a new era of blood screening technology in the United States.

We also completed the worldwide launch of the Cell-Dyn Sapphire, a high-volume hematology instrument which has the potential to change the way physicians diagnose and monitor anemia, cancer and infectious diseases.

In Abbott Diabetes Care, we introduced FreeStyle Connect, the fastest blood glucose monitor available in the hospital.

With results available on average in 15 seconds, FreeStyle connect also features the smallest blood sample requirement in the point of care environment.

In our molecular business, we launched in Europe two real-time RealTime PCR assays for HIV and HCV, strengthening our presence in the large and rapidly growing molecular diagnostics market.

These new product additions, as well as those that we will introduce in 2006, will continue to shape the future of our Medical Products business.

With that, let me discuss our 2005 performance and provide you with our outlook for 2006.

Starting with our worldwide diagnostic segment, which includes immunochemistry, molecular diagnostics, point of care and diabetes care, in our core immunochemistry and hematology businesses, our focus remains on menu expansion and margin improvement, which we saw in the fourth quarter.

We anticipate continued improvement in 2006 and beyond.

During the year we surpassed our goal for ARCHITECT placement, installing more than 1600 instruments.

We continue to expand the U.S.

ARCHITECT cardiac menu, launching BNP and myoglobin, as well as launching assays for ovarian and breast cancer.

In the last few weeks, we have filed PMA submissions for three hepatitis assays for ARCHITECT and [AXIM].

We will file an additional four PMA submissions for hepatitis assays in the first quarter, providing Abbott with a complete line of automated hepatitis products.

We continue to develop the latest additions to the ARCHITECT family, which will allow us to even better serve the needs of our laboratory customers.

The c16000, a chemistry analyzer designed for the high-volume lab, and the i1000SR, which is an immunoassay system, ideal for smaller volume customers, will help laboratory personnel better manage their unique workflow needs.

At this time, we plan to launch both analyzers at the end of 2006 or early 2007.

Also in 2006, we will continue to expand the PRISM menu, providing our blood bank customers with more testing capabilities.

Now turning to Abbott Molecular, sales grew more than 20% in 2005, driven by the international launch of HIV and HCV RealTime PCR assays on the m2000 platform.

Infectious disease testing represents 50% of the large and rapidly growing PCR testing market.

Recently outside the U.S., we also launched RealTime test for chlamydia and gonorrhea, the two most common sexually transmitted diseases in the world.

In the U.S. we expect to introduce RealTime PCR assays for HIV, chlamydia and gonorrhea late in 2006.

In point of care, we also continued strong double-digit growth in 2005.

Recently we launched the CK&B assay on our i-STAT platform, which allows physicians to better diagnose a heart attack at the patient's bed side.

We plan to launch another key cardiac assay, B&P, on this platform during the first half of this year.

We were recently granted FDA approval for our Chem 8 cartridge, which includes eight of the most commonly requested metabolic tests in an emergency room.

In approximately two minutes, healthcare professionals can assess the patient's metabolic status and make on the spot treatment decisions.

Our goal is to get this assay cleared away for use in physician offices.

Abbott Diabetes Care for full-year 2005, sales were more than $1 billion, representing nearly 35% growth.

ADC's total dollar market share increased approximately 2 points in 2005, further strengthening our market position.

In 2006 we expect continued double-digit growth as we expand market share with further penetration of our FreeStyle and Precision brands.

In late stage development, we continue to advance FreeStyle Navigator, our continuous blood glucose monitoring system.

The clinical studies for the PMA approval are now complete, and we are very pleased with the results.

This completes the clinical section of the PMA, and Abbott anticipates launching FreeStyle Navigator later this year.

So for 2006 we expect high single digit growth in our worldwide diagnostic segment, led by continued strength in our diabetes, molecular end point of care franchises.

Now turning to global nutritionals, sales grew double-digits for the full year, driven by strong growth in our international nutritionals business.

This was led by exceptionable performance in Latin America and Asia, especially in China where there continues to be high demand for our follow-on formulas.

We are further concentrating our efforts in these emerging markets in 2006 as we begin reporting our international nutritions operations as a separate business segment, which will be known as Abbott Nutritionals International.

Sales in our U.S. nutritionals were up nearly 9% for the year, including strong performance with Ensure, Pedialyte and PediaSure brands, as well as additional revenues earned under our revised agreement for Synagis.

This was partially offset by a sales decline in our infant nutritional business due to share loss.

We took actions in the second half of the year that have now resulted in recent share gains, which we anticipate will continue into 2006.

So overall we expect low to mid single digit growth in our U.S. nutritionals business in 2006.

In 2005 Abbott Spine had a strong double-digit growth year and continues to outpace the market growth, a trend we see continuing in 2006.

Last fall we initiated a U.S. clinical trial for the Wallace System used for the treatment of mild to moderate degenerative disc disease.

This innovative spinal implant technology is designed to stabilize the spine and reduce pain while preserving a patient's range of motion.

The Wallace System has been used in degenerative disc disease now for a number of years.

In our vascular business in 2005, we reached a number of important milestones with the launch of StarClose and our carotid system in the U.S., as well as continued progress in our ZoMaxx drug-eluting stent clinical programs.

Sales for the full year were up double-digits.

The U.S. launch of StarClose is off to a very strong start early in the year.

As a new method of vessel closure, we think StarClose could change the current standard of vessel closure, having the same success in the U.S. as it had in Europe.

Abbott's European vessel closure share has nearly doubled since the launch of StarClose.

Good momentum continues with the launch of our carotid stent platform, and we expect to continue to gain market share in this area.

We also continue to enroll our ACT 1 clinical trials, evaluating the use of carotid stenting with embolic protection in a broader asymptomatic patient population.

In our pipeline, our drug-eluting stent, ZoMaxx, continues to make good progress in development.

The first human ZoMaxx clinical trial results will be presented at ACC in March.

The ZoMaxx [IVIS] study, which is a 40 patient trial, will offer a first look at clinical performance with angiographic and IVIS results at four months.

Although at this time I cannot share the specifics of the results of the study, I can say we are very encouraged by the data.

We remain on track for CE Mark approval and European launch in the second half of 2006.

We also continue to enroll patients in ZoMaxx II, our North American clinical trial, and we will soon be petitioning the FDA for expansion to full enrollment.

A new ZoMaxx trial called ZoMaxx Europe will begin enrolling in the first quarter.

This is a single arm registry enrolling 900 patients that will provide additional supporting data for our PMA submission with the FDA, as well as supporting data for our ZoMaxx commercial launch in Europe.

Also in 2005 we presented preclinical data on our Next Generation DES program which is behind ZoMaxx.

This program combines zotorolamisJ and dexamethasone on our TriMaxx stent.

It is designed to treat the difficult patient populations such as diabetics where restenosis rates still remain high.

We believe zotorolamisJ and dexamethasone are uniquely suited to improve clinical outcomes in this patient population, and we're encouraged by the preclinical data.

So for the overall Medical Products Group, we expect continued momentum from our strategy of participating in the highest gross segments of the Medical Products market.

Given this momentum, including a number of new products and continued strength of our on market products, we expect to deliver another year of strong growth in the high single to low double-digit range.

With that, I will now turn the call back over to John for questions and answers.

John?

Thanks, Rick, and we will take your questions now.

Operator, if you want to open up the call.

We ask ask a professional courtesy, if you can to limit your questions to one topic.

Operator?

(OPERATOR INSTRUCTIONS).

Rick Wise, Bear Stearns.

Congratulations on the deal.

It changes things.

A two-part question, one relating to earning and one the operations.

The pro forma, our pro forma, Miles suggested this is going to drive double-digit sales growth and kick you into the 10 to 12% earnings per share growth range sort of toward the end of '07, '09 period.

Does that sound rational to you?

And for Rick or Miles, perhaps you could talk about the integration challenges of putting these operations together.

To what extent is this plug and play the manufacturing and clinical?

Just talk about all those logistical issues.

Who is going to run the business and help us understand all that?

Thanks you.

Okay, Rick, I will give you I guess a balanced answer to your question on earnings growth.

It is a very clever way to try to get me to give you some guidance for the future, but I would tell you we always target double-digit growth, and so from that standpoint, I would say your question is I think you said very rational.

At the same time, I am not going to give you guidance for '07 through '09.

I would just tell you it is always our target, and clearly this is a plus for us that will certainly help our ability to reach the targets we always set.

Now let me give Rick the other question.

Sure.

Obviously we have looked at the integration.

We need to do a lot more work.

I would tell you that we believe both our own organization and the Guidant organization are very talented groups.

Our intent will be to bring those two together.

I think if you look at it from a cultural standpoint, there is a very good cultural fit between the two groups.

As you may know, we have hired a number of Guidant management that is in our Abbott Vascular Devices group already, and the locations are very synergistic.

You know our Redwood City location is very close to the Santa Clara location, and so we believe this will be a very easy integration that we can implement in a positive way.

Just a quick follow-up.

You mentioned the ZoMaxx trial.

How many patients are enrolled out of how many do you need, and why is the FDA so slow to expand the number of centers?

Well, you are talking about ZoMaxx II I assume, the U.S. pivotal trial?

Exactly.

Yes.

We have approximately 200 patients enrolled, and the FDA, as I said, we are going to petition the FDA to expand the trial.

The FDA wanted to see some additional information, human clinical data out of ZoMaxx I, which we will be providing to them, and some additional animal data which we have ongoing.

And so once the expansion occurred, we will see enrollment ramp up very rapidly.

I think the other thing that is important to note is, as I mentioned, at ACC we are going to present the first clinical data, and I think that would be a nice thing for you to take a look at.

Glenn Novarro, Banc of America Securities.

I have another question for Rick on the Guidant transaction.

Maybe can you talk to us a little bit about your plans to sell two stents?

You are going to get access to Xience.

It sounds like ZoMaxx is moving forward.

Do you sell them both in the U.S.?

Do you go forward with the strategy of selling one outside the U.S., one in the U.S.?

Maybe help us understand how you market two stents at the same type, and then I had a follow-up question on pharma if I can.

Okay.

Glenn, obviously we have to see the clinical data out of the two programs, and what I have described to you is this.

We contemplated a couple of different scenarios.

We are assuming that based on what that data looks like, if it looks relatively consistent across the two programs, we would market both products.

If there was some differentiation in the clinical data, as an example if one stent did a little better in the diabetic population, we would obviously market it in that way.

But we don't know that at this point in time.

Assuming the data is relatively consistent, our thought process is what will differentiate the two products will be the stent platform.

I think, as you know, there is a well-established base of physicians that like the VISION stent.

They will be easier to convert I think to a Xience kind of product based on their preference for that stent platform.

They are also a large group of interventional cardiologists that like leading-edge new technology, and that is really where TriMaxx I think will fit in to the strategy.

And so it is our intent to market both products.

And then just for Jeff, as I look out to '06 versus '05, there is probably less new product flow or at least clinical trial data that we need to look forward to.

And, in fact, can you point to what you think will be some key milestones for the pharma business in terms of 2006?

Yes, I'm not sure I agree that there is less clinical trial flow.

As you know, we have been ramping up our R&D efforts over the last three years.

Maybe I should say less controversy, how about that?

Okay.

I might take that.

Let me give you a couple of things that we will see this year.

We will see as I mentioned the second pivotal trial for Crohn's Disease, which is obviously important for our sBLA submission, and I think that is going to be exciting data because everything that we've seen so far anyway in Crohn's suggests that HUMIRA is a best-in-class product there.

Does that come at Digestive Disease Week?

Yes, it will likely be at Digestive Disease Week, yes.

We will hopefully be able to share some Phase II data for ABTA 74 in multiple sclerosis.

Obviously that's a more cutting-edge program, but an important one for us.

You will see -- (multiple speakers)

Is there any timing there?

Is that 3Q to 4Q -- (multiple speakers)

It will be (multiple speakers) later in the year.

Is there a conference that it would come --?

I don't think we have scheduled it yet at any particular conference.

We will have data from our 244 trial on Xinlay, and that will also come later in the year.

Would that be like ASCO in May?

We're not -- again, that one is a little harder one to predict because as we have talked about before it is an event-driven trial.

And so we need to complete those events, and while we have a pretty good sense of where we are, it's impossible to predict when the final events will occur.

So it is impossible to schedule that precisely, but it will definitely be this year.

So I think we will have a number of pieces of new data, and in addition we are finding more of our early pipeline than we have ever been able to fund this next year.

So you will start to see data on a number of compounds in the cancer area.

For instance, Bcl-2 compound will go in demand.

Our targeted targeted kinase inhibitor is in demand.

We have several neural compounds for cognition and Phase I and Phase II, and so we will begin to get a read on the signals that we are seeing the strength of the signals from those compounds.

So we are actually anticipating a pretty exciting and full and rich year of clinical data from the pipeline in '06.

Yes and the only thing I would add to that, Glenn, is what Rick said about the DES ZoMaxx data, first human data at ACC in March.

Just one other thought, you did not mention TriCor.

Are there any clinical trials that we will see in 2006 TriCor in combination with other statens?

Yes, we have a number of ongoing trials of TriCor in combination with other agents, and some of that data you will begin to see in 2006.

And would that be as early as March at ACC, or do we have to wait later in the year to AHA?

It might be later in the year.

Okay.

We will get back to you on details on that later.

Okay?

Mike Weinstein, J.P. Morgan.

I will offer my congratulations on the Guidant bargaining returns action.

Maybe we can start with a little bit more focus on that.

One question we have had is the relationship you would have with Boston Scientific around Xience, and maybe you can shed some light on the difference in economics for Abbott should you guys sell a Xience stent versus Boston Scientific selling a rebranded Xience?

And then I have a couple of follow-ups.

Mike, this is Rick.

I think as Boston has described the arrangement that we will have with them is we will OEM them a product until they have done a clinical trial and transitioned it onto their own platform during that time.

It basically works out where we split gross margins 40/60 where we get 40% and they get 60%.

I don't know that it is appropriate for me to talk about the ratio between our profitability and their profitability in this arrangement, though, other than that.

Okay.

And the 40/60 split, from that the cost of manufacturing and the royalty payment to Novartis would be on Abbott, or would that be --?

No, the way it will work is, you will have an average selling price, and I think Boston described this in some detail in their First Call.

You will have an average selling price.

You will subtract a set manufacturing cost, you will subtract a royalty, and you will subtract what they are calling a variable selling cost, which is 7%.

That is what is defined as gross margin, and we split that 40/60.

We get 40; they get 60 after that.

Okay.

The second question for you would be, assuming everything moves forward here, are there steps you will be taking to secure some of the Guidant vascular management into the Abbott fold?

And is that in your -- should that be in our thinking as we try and figure out near-term accretion dilution from the transaction?

Sure.

As we did our diligence, we assumed that we would retain much of, if not all of the Guidant management.

We have assumed in their retention packages in our model incorrect.

And Rick, just getting back to the original question here in terms of potential impact on the Company, you know the street can have various estimates for how Guidant might do in terms of market share, but is it a fair comment to make that the potential accretion from Guidant from the successive launches in Europe, the U.S. and Japan '07, '08, '09 -- I'm sorry, '06, '08, '09 -- can it bring this Company to a level where it consistently deliver at least over a three-year period double-digit earnings growth?

Is that something that where the competence level is now there where the Company has not had that for half a dozen years or more?

Mike, this is Miles.

I think it is premature for us to be giving you '07 to '09 guidance.

Obviously, and I think I answered that earlier, what our intentions and goals are, this will be an accretive transaction for us in the timeframes you referenced.

So I think that is as far as we would go with it at this point.

Sara Michelmore, SG Cowen.

I had a question on the gross margin and the outlook for the gross margin now that we can put the Boehringer Ingelheim deal behind us.

And I guess in your comments you have alluded to some underlying gross margin expansion, and I'm just wondering as we look out over the next two to three years where you think that gross margin can go, and how much of that is due to some of the cost reductions that you have planned, and what is the effective mix?

In particular, what products or franchises do you think are most important for us to keep an eye out on as we look out the next two to three years on the gross margins?

Thanks.

As I indicated in my remarks for '06, the margin expansion is a combination of both the BI effect but also contributions from our cost reduction programs.

Incrementally next year that over what we already delivered in '05, there is roughly .5 point for that.

But we do see continuing mix improvement, and what we are growing at this company is the higher margin products, all the things that Rick talked about and Jeff has planned HUMIRA indications and the like.

That is where we are going to be growing.

We have done a great job stabilizing some of the other products such as Synthroid, and when you add that all up, our assumption going forward is you are going to see steady improvements in the gross margin beyond 2006.

Maybe just as a follow-up for Rick, I imagine that some of the franchises in that Medical Products business are very low margin like the core immunochemistry and hematology, and then there is a big difference between the margins for type of business and something like the diabetes business.

So I'm just wondering if you can comment in terms of what exactly you think are the highest margin contributors in the Medical Products Group and what are the lower ones?

I think it is as Tom said.

I mean obviously much of the growth in our diagnostics sector is coming from the emerging businesses -- Molecular, Point of Care and Diabetes Care.

And all of those have very robust margins associated with them.

I would also say, though, it is important to point out, we have spent the last couple of years working to improve gross profit margins in the base immunochemistry business in particular, and we are making nice progress there as well.

Joseph Schwartz, Wellington.

My question is for Tom.

Tom, thanks for providing the year-end cash flow data.

Could you provide some information on what the balance sheet looked like at year-end, the level of net debt, and what some of the other key metrics on the balance sheet were?

Also some comments please on given the Guidant transaction pro forma, how you will be financing that, what the impact will be on the balance sheet and those metrics?

Yes, I mean looking at the balance sheet for '05, we had very modest changes year-over-year in inventories and receivables, which in a growing business, you know, is a good thing.

That certainly contributed to our cash flow.

And talking about the financing obviously, we have got good financial backing from our financial institutions, and we probably will be going out with some type of long debt issue to support the Guidant acquisition when it closes.

So we are in good shape on that.

It will be largely long-term debt to fund it.

Can you say what the level of net debt was at year-end?

Yes, we were -- we actually improved about $1 billion over the end of 2004 with debt down about 150 million year-over-year and cash up around 7 or 800 million.

So net debt is down around $1 billion.

Glenn Reicin, Morgan Stanley.

I just want to concentrate for a little bit on Ross.

Can you explain a little bit about what happened in the pediatric market?

I don't know if it is WIC, retail?

What changed the market share and what you're doing to address it?

And then secondly, can you talk a little bit about the changes in payments from MedImmune?

Obviously Synagis it looks like those payments are down significantly, and then that was partially offset by these onetime MedImmune payments.

So in terms of taking back the rights there, can you just walk us through how the math works and where we find that in the sales numbers?

Okay.

Let me address the pediatric nutritional business.

It was really a combination of a couple of different issues, and so it was both WIC and non-WIC.

So I'm going to break it down into two parts.

If you look at the WIC environment, one of the things that we saw particularly early on in the year is that WIC overall volume trended down at the beginning of the year.

And in the WIC program, as you may know, there are a certain number of cans of formula that are provided as part of the WIC formula, the WIC program, and then the mother typically purchases a small number of cans above and beyond that.

What we saw is we believe through some of the economic challenges that these families face, we saw that extra can purchase go down pretty significantly, and so I would say that represented about half of the decline we saw.

The other half was just pure share loss.

We saw a share loss of our non-WIC business, and we made some changes in some of the things that we did about midyear, the latest data points are pretty encouraging.

We are up about 3, 3.7 share points as we leave this year, and so it was a competitive situation.

We just lost non-WIC share in that segment. (multiple speakers)

That was to Carnation, or who was that to?

It was split I would say roughly equally between Meade, Carnation and a little bit of private-label.

All right.

And then the MedImmune payments?

Actually I did not quite understand your question.

Can you reask it?

Okay.

I will try to do this.

Obviously you get ongoing royalties or copromote payments on the sales of Synagis.

So I want to look at those, and then MedImmune is going to be giving you a series of payment through the middle of '07 in addition to that.

I would like to know what those different payments are and where we find that in the sales numbers?

I think the easiest way to think about the fourth quarter copromotion with MedImmune is when we negotiated the contract, we get paid a higher commission on sales performance.

And so if you look at the quarter, we actually over-performed from a sales standpoint, and because the commission rate is higher, we earned more out of that commission rate.

So it was purely a function of that, so it is in the sales line.

Okay.

So just on the other nutritional line, actually on the pediatric domestically, I think it's about 100 million versus 52 last year.

So the question is, of that increase, how much of that is this copromote versus the one-time payments?

It is about 40 that is in there.

40 is onetime payment?

Again, it is not onetime payment, remember --

Or onetime through '07.

(multiple speakers) -- higher commission rates.

So 40 is the commission rate?

40 is the incremental growth in commission rate that we have received in the quarter.

But I think it's very important to note not -- this is not a one-timer, and it would be improper to characterize it that way.

It is strictly commission rate based on sales pro forma.

But what about the payments from the restructuring of the agreement?

You know, in other words, past '07, they have all rights to Synagis, and you are -- in return they are giving you additional payments?

What are those payments this quarter?

It is nothing in addition to what the sales commissions are requiring like what Rick talked about.

There is no onetime milestone payment if that is what you're asking in the fourth quarter.

Is that what you're asking?

Yes.

Yes, there is none.

Okay.

And are there any expected in 2006?

Not that I am aware of or you would be aware, no.

Okay.

Thank you very much.

Katherine Martinelli, Merrill Lynch.

Two questions, please.

The first one for Miles and not to harp on the longer-term guidance, but I just wanted to see if you could elaborate at all back in September you had made some comments regarding greater confidence about escalating earnings growth in '07, and I think per your words, it was quote unquote plausible, and at that time you also declined to provide a forecast, which I'm not asking for now, but I would just like to get your thoughts of what you may think the street may be underestimating that gives you that conviction because this was obviously all pre the Guidant deal and the impact from it that you will realize from the vascular business?

Well, first let me clarify for you I'm not going to give you guidance for '07, '08, '09, although we have indicated that we expect to be double-digits in '07, which is as far out as we are going to go, and it's always our target to hit or exceed double-digit growth.

You have got either a great memory or a transcript because I don't recall it.

But in any case I think there is a number of places where the streets are estimating our performance, and I think the reaction that we got back in September to Xinlay and a couple of our pipeline products was, frankly, a fairly dramatic overreaction in terms of the expectations of our future.

Things where I think the street is underestimating performance, I will give you real quick.

I think they are underestimating HUMIRA.

I think they are underestimating TriCor, and I think they are underestimating Diabetes Care.

Those three come immediately to mind.

I think that a lot of our emerging medtech businesses don't get a lot of attention, and when you add those up, they are fairly significant.

Our pharma business has shown a very steady ability in the U.S. in particular to grow at double-digits steadily.

And for whatever reason, I don't believe that the street entirely, let's say, views that as objectively as it could.

So I think that it is easy to look at any one product or a pipeline product and say, wow, there is going to be a gap or something in the future.

But all of us in this business, particularly the pharma side of the business, have portfolios of products in our pipelines, and some will emerge and some will not, and I think that is typical.

And we look for -- to have a balance of products so that -- and we risk adjust as we put our plans together so that we are not setting our expectations on an all greenlight scenario.

So we balance all of that, and I just think that the street has, as our President would say, has mis-underestimated a lot of the factors going forward.

It is easy to take one unique product and say, hmmm.

But I think a lot of models that are out there and we tend to watch and track, particularly the sell-side models.

We don't give you a lot of detailed guidance on some of that, but I think a lot of those models are off on some of the products I mentioned.

Great.

That is very helpful.

And just one quick question on the tax rate.

I think you had said you were forecasting an uptick this year.

Can you just help us understand is that a product mix, or are you seeing less of a benefit from shipping some of the -- I thought some of the diagnostic manufacturing was going outside the U.S.?

It is not an uptick.

It is actually a modest reduction from the '04 ongoing rate, and that is driven by basically earning income in lower tax jurisdictions through a number of our tax planning efforts.

So the guidance I gave was between 23.5 and 24% compared to the 24% rate in 2005.

Bruce Cranna, Leerink Swann.

A couple of things quickly, guys.

Just on your HUMIRA expectations for '06, can someone maybe give us a sense as to of the 1.9 billion, what is your consumption there on the contribution from non-RA indications?

I cannot give you the numbers or won't give you the numbers, but I think if you have been watching the dermatology numbers, we have been very very encouraged that just literally several months after the launch, we have already picked up more than 6 share points there, and the feedback that we're getting from physicians is a clear understanding of our best-in-class skin data, which really differentiates our product in derm away from the competitors' products in a way that is quite unique and maybe not true in RA.

So we are expecting a significant contribution from derm based upon what we have seen so far and the feedback we are getting, and we are also expecting significant growth in RA.

Because one of the things that we have seen over the last four months is a very consistent share gain in RA with NRXs running ahead of PRXs, and as you have probably seen, a lot of that is coming from Enbrel, which is encouraging for us.

Okay.

And then, Jeff, I guess as long as we are on drugs, I'm sorry if I missed any commentary on TriCor.

But I'm trying to recall if you said anything, but I think clearly a pretty big quarter there, and I'm just kind of a little bit confused.

Is that sort of inventory I guess changes, if you will, or a post-AHA bump, which would be clearly somewhat counterintuitive?

Can you give us any color there?

Well, first of all, let me talk about post-AHA because that one I strongly disagree with as I think I explained to a number of people at AHA.

When we look at the field data, that is an incredibly positive set of data for TriCor.

You have to remember that what field basically showed is that TriCor is a very useful drug in very early and essentially well-controlled diabetic patients.

At the current time, less than 15% of those patients are actually being prescribed TriCor for prevention of cardiovascular disease.

As we have gone out and explained that data to physicians, I guess I would say they have gotten it a lot better than some of the analysts got it.

They really understand that.

And so we are seeing a significant pickup in TriCor scripts from physicians that are treating these diabetic patients.

So that is the post-AHA comment.

And, as you see, TriCor is well outgrowing the lipid market, which I think is an indication of some of that activity.

The second thing is if you look at the sales for the year versus the scripts for the year at TriCor, they are dead on.

So there has been no net change in inventory over the year.

We do occasionally see quarter to quarter changes.

There was some destocking of inventory in the third quarter.

It picked up again in the fourth quarter, but as we look at the year, we are very comfortable that the inventory levels have not changed relative to the sales.

Most importantly, we are very pleased with the sales growth as compared to some of our competitors on lipid products that have slowed down significantly in the fourth quarter.

Okay.

Thanks.

And just one quick last question for Rick as long as he is there.

Just on the ARCHITECT number, I think you said -- I think I heard you say 1600 for the year.

If memory serves, I think the number at Q3 or the guidance at Q3 was for 1500.

So can you give us any sense that if, in fact, that is a stronger quarter than you expected if my memory is correct?

And then if there was upside in the number of placements, can you comment on whether or not that was EU or U.S. driven?

Your memory is correct, and we actually exceeded the 1600.

So we did place more ARCHITECTs than we had assumed in our original plan.

I credit it to the fact that we are winning more of the competitive bids.

It is pretty evenly split, although I would say Europe is probably outpacing the other markets slightly, but we are actually winning at a rate that is very comfortable in all the major markets around the world.

And so we are pleased with the overall performance that we have seen there.

I would say in the U.S., as an example and as you probably know, it takes time once you place one of these systems to get all the reagents up and running, and we have had a number of major closes both in the U.S. outside the U.S. with the ARCHITECT system.

But in the fourth quarter we actually saw a quarter to quarter sequential growth in immunochemistry in the United States, and it was up about slightly over 4%.

So that was encouraging, and that is driven by the placement rate primarily.

Okay, Bruce?

Thank you.

And before we conclude, Miles is going to make some very brief concluding remarks.

Thanks, John.

I would say that we are very pleased with the results of '05.

A lot of our colleagues in the industry and, frankly, me, too, have noted over the last, say, five years that this has been a pretty difficult environment, particularly for pharmaceutical companies but in general in healthcare.

And I think it is going to continue to be a difficult environment, but I don't see it any more difficult than, frankly, what it has been.

And I think in an environment like this, what we, companies have to do is make sure that we are putting the investor resource behind those most promising businesses, most promising technologies, most promising areas that will still drive growth.

And while the environment is difficult, I look around at other industries whether it be automobiles or aviation or whatever it is and I think, you know, no matter how difficult you talk about our environment being, I know there is other ones out there that are tougher.

As we look forward, we are actually fairly optimistic, and I think legitimately so.

We like the strength of our business mix.

We like the strength of our pipelines in all of our businesses, even though we're going to occasionally have a setback technically or clinically as the case may be.

We like the breadth of our opportunities in our pipeline, and so as we look forward, we still maintain optimism that we are a double-digit grower.

And I know all of you would like to have some very precise crystal ball guidance on the out years, and it is mostly my philosophical resistance to doing something like that so far out.

But I'm reasonably optimistic that we remain a double-digit grower.

I don't want to give you specific guidance on given years.

We have told you we expect to be double-digits in '07, and we target maintaining good, solid, reliable double-digit growth, or frankly, the identity of us as an investment would change.

We expect to be in that range.

I don't want to give you details today of what that might be because that mix will change.

Clearly the Guidant vascular acquisition will very positively contribute to that, but frankly, we expect it to be double-digits before that.

And so I look at that as a nice enhancement to the mix that we are putting together here.

We are very very pleased with the steady performance of our pharmaceutical business and particularly in the U.S.

Now we're not without our challenges here like anybody else, but I like our pipeline.

I like our portfolio.

We especially like products like HUMIRA where there are so many opportunities to expand it, and it has been a great and successful product.

And an awful lot of our growth is coming in areas that clearly are higher margin.

So we are seeing good sales growth.

We are seen good expansion internationally.

We are seeing margin expansion.

We continue to expand our pipeline, and so in spite of the fact that the environment will throw a number of challenges at us whether regulatory or cost constrained or whatever the case may be, we continue to navigate all that very well, and I think our performance, say, over the last five years relative to the peer group, has been very steady and reliable, and we find a balance between how much we can invest internally and how much to return to you, the shareholder.

I think that our financial strength is evident.

We have been paying off debt.

We have been buying back shares.

The balance sheet continues to improve, and obviously we will take on additional debt with the Guidant vascular acquisition.

But it will be our objective to pay that down as rapidly as we can, finding the right balance between maintaining the kind of dividends our investors want to see and the kind of share repurchase our investors want to see.

But fortunately our financial performance is strong enough that we can do all of those things.

Our pension plan is fully funded.

So we just don't have any deficiencies there.

I think that the Company now is probably as well positioned as it ever has been, and when the vascular transaction concludes, even more so.

So I'm very pleased with the balance in the Company.

I think we represent a unique investment opportunity because of that balance.

We resisted the pressure from a number of sources some years ago to go pure pharma or pure device.

I think that we made the right call in maintaining the kind of diverse portfolio we have.

But in that diverse portfolio, we expect to see growth, and we expect to see that the levels our investors have traditionally looked for and expected, and that is what we expect to deliver, frankly, over the next five years and beyond.

And that is as close to guidance as I can give you because philosophically I just hate to give guidance that far out.

But we are feeling pretty comfortable and pretty happy this morning.

So we think it was a good quarter.

We look forward to '06.

We think this will be another good year for us.

We have got a lot of good things coming in the pipeline, and I like the way things are emerging.

So with that, we will conclude the call.

Thank all of you for being with us, and I know that John and the IR team will be available to take any other questions you have during the day.

Thanks, Miles.

That does conclude our call.

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